Captured CPSC, Road Show Edition
posted by Frank Pasquale
The last time I blogged about Nancy Nord, head of the Consumer Product Safety Commission, I thought it would be the last. Certainly anyone caught in the middle of escalating product recalls and public outcry over toy safety would be responsive to efforts to improve the CPSC’s budget and staffing. Consider the following report:
Government statistics show that imports have increased by 338 percent since 1974, the year the Consumer Product Safety Commission was created. Yet the budget for that agency today is less than half what is was in that year. In effect, we have been disarming our ability to protect ourselves, even as the need to do so has been soaring.
But I was wrong. Nord has instead told Congress not to give the CPSC more funding and enforcement authority. The Washington Post now suggests some reasons why: she and “her predecessor have taken dozens of trips at the expense of the toy, appliance and children’s furniture industries and others they regulate.” Hilton Head, Barcelona, Orlando–ahh, the difficult life of the regulator:
In February, for example, Nord accepted more than $2,000 in travel and accommodations from the Defense Research Institute to attend its meeting in New Orleans on “product litigation trends,” according to her report. The institute is made up of more than 20,000 corporate defense lawyers. In 2004, [her predecessor] Stratton attended the group’s meeting in Barcelona, at a cost to the group of $915 for his hotel room.
The guiding “philosophy” behind the current CPSC appears to be a belief in self-regulation: companies themselves should take primary responsibility for safety. My question is whether, after a case like MVMA v. State Farm, an agency can use a political commitment to libertarianism to trump its extant legal and scientific obligations to protect the public. For example, what if the CPSC just decided that any penalty of, say, more than $100 for death-causing injuries would ultimately be counterproductive because it would discourage reporting? Should courts defer to such “agency expertise”? I’d always hoped such questions would remain mere bizarre hypotheticals, but we appear to be in a world where their relevance increases by the day.
November 2, 2007 at 7:32 am
Posted in: Administrative Law
Print This Post
Responses (7)
Daniel Goldberg - November 2, 2007 at 10:52 am
It is truly astonishing to me that anyone who takes the time to seriously familiarize themselves with the history of health policy and consumer safety over the last 100 years could remotely believe that self-regulation is an effective means of preserving public safety at a morally acceptable level.
It is historically irresponsible to maintain this. Of course, an argument can be made, as an argument can be made on virtually anything. But the weight of history is heavily stacked against such a claim.
Frank - November 2, 2007 at 11:38 am
I think a big part of the libertarian dream here is that the internet allows “perfect information” about the relevant companies. In other words, once once person gets sick from Anon-a-corp’s spinach, they’ll tell their story on the web and everyone will hear about it and avoid Anon-a-corp. Or, more plausibly, some information gathering company will monitor the others.
I think libertarians might also say that everyone should be able to make a price-safety trade off. So, for example, poor families should be able to buy more, cheaper food from Anon-a-corp due to its poor reputation, and thereby can save money by risking their health. (Much less of a tax burden than food stamps!) I think they’d take the model of getting paid more for a difficult or dangerous job into all walks of life.
As for me, I’d rather have a government that sets basic standards. And that’s one reason why the EU is becoming the de facto world standard setter:
http://www.economist.com/world/europe/
displaystory.cfm?story_id=9832900&CFID=19230555&CFTOKEN=13130608
Jeff - November 2, 2007 at 12:01 pm
I was at a wedding with some workers for Fisher-Price this weekend, and they were bemoaning the “unnecessary recalls” and what it was doing to there bottom line. The did admit however that they are experiencing near record profits.
I think one of the principles of libertarians, in additional to the dream of “perfectly informed consumers”, is full and equal access to the court system. Companies would be incentivized to create safer products out of fiscal responsibility to avoid liability. Unfortunately , I would imagine it is frequently those people who are forced to use the riskiest/lowest cost products are also those people with the least access to the courts.
merevaudevillian - November 2, 2007 at 1:16 pm
Isn’t the word “political” doing a lot of work in this sentence, as in, “a political commitment to libertarianism to trump its extant legal and scientific obligations to protect the public”? Unless we deem libertarianism solely political rather than, say, economic, we could just as easily reconstruct the sentence to read, “a political commitment to protectionism to trump its extant economic and empirical obligations to maximize market efficiency.”
Alternatively, the market does seem to be solving this issues, or at least it’s beginning to. A recent Consumer Reports survey shows that 89% of consumers are aware of the recalls, and of them, 30% will purchase fewer toys and 30% will not purchase toys made in China. Given the “escalating product recalls,” it is curious that (1) most people know about them, but (2) that most still think the risks are not significant enough to change behavior, though (3) a substantial minority are changing their behavior in a way that might require the market to make some alterations or risk losing a large portion of sales. 30%, after all, while still a minority, would really harm toy producers if they fail to take action on their own.
Daniel Goldberg - November 2, 2007 at 2:16 pm
Frank,
Yes, the libertarian will say that, but there are some serious problems with the arguments. In the first place, there is a very serious problem of asymmetrical information. Contrary to merevaudevillian’s argument, recalls do not “solve” the problem in any way, shape, or form, because by the time the recall is issued, often enough, consumers have been hurt or have been killed.
Indeed, a strong regulatory body is one (though not the only means) of trying to resolve the problem of asymmetrical information. Ideally, we’d like to prevent disasters from occurring, rather than simply reacting to minimize the harm once it has already done so.
Note, this is not to deny market forces have some role to play in regulating manufacturer behavior. This strikes me as trivially true. But the notion that the industry should self-regulate and that that is sufficient to minimize the harm and strike a morally satisfactory (note, not efficient, but morally satisfactory) balance between safety and price is absolutely belied by the weight of history.
merevaudevillian - November 2, 2007 at 2:57 pm
Daniel, I agree to a large extent about the distinction about “solving” problems and prevention. But I wonder if it’s not the case that consumers remain ill-informed because they rely upon the government to do so, and the government, even in its best attempts, would be more inefficient than the market’s own policing. For instance, we can chalk up the increased recalls to correlative decreased consumer product testing, but it’s certainly the case that many private toy manufacturers (such as Melissa & Doug) are ensuring customers of their own products’ safety, regardless of government testing. But Canada, which generally has greater government regulation than the United States (though I express no knowledge of their consumer products inspections), also has experienced identical recalls as the United States.
Being no strict adherent to law-and-economics, I wholly accept a distinction between “efficient” and “morally satisfactory.” But I wonder if, in our zeal to achieve the best moral result, we’re too ready to rely upon remarkably substantively, not economically, inefficient ways of protecting consumers in order to avoid the economic efficiency side of the equation, which is never morally ideal… but de facto may provide a more moral result than the “morally satisfactory” regulation.
Daniel Goldberg - November 2, 2007 at 3:15 pm
MV,
I don’t deny that there could well be an increased role for commercial forces in correcting the asymmetries of information. Nor do I deny the possibility that government, “in its best attempts,” would be more more inefficient that the market’s “best efforts” at self-policing.
Two points are relevant here: Frank’s critique is at least in part that government has gotten nowhere near its “best attempts” in correcting for these asymmetries. Moreover, abstract notions of what the industry’s “self-policing” might look like are of little use absent analysis of the incentives for the industry to self-police. This is why the distinction between morality and efficiency is so crucial. Where a policy — say, of less-than-vigorous self-policing — is efficient but unethical, what reason is there under a straight micro analysis for the firm to more vigorously police?
Sure, in an ideal world, it is plausible to argue that the market’s best efforts at self-policing might be superior to the government’s best efforts at self-policing, but the world we live in does not resemble that ideal. More so, it has not resembled that world over the past hundred years.
I’m not sure I understand why you claim that the economically efficient behavior may “de facto” provide a more moral result than the ‘morally satisfactory’ behavior. Ex hypothesi, the claim is that the economically efficient behvaior is certainly not coextensive with the morally sufficient behavior, and has historically been divergent.
Some kinds of efficient behaviors may produce policies and behaviors we judge as ethical. Indeed, often enough, this is the case. But there are also no shortage of scenarios in which the descriptive claim that a regulatory-market balance is efficient seems to fall short of normative assessments. My basic claim is that this is precisely one of those scenarios, and a major part of the reason for that is the terrible asymmtries of information as to these consumer products.
I am certainly open to market-based suggestions for resolving these asymmtries, but the problem is that there seems little incentive, as you point out, for firms to spontaneously do so by themselves. In the absence of these incentives, I see little alternative to mandates.
Leave a Reply